(a) Scope. A teaching hospital may elect to receive payment on a reasonable cost basis for the direct medical and surgical services of its physicians in lieu of fee schedule payments that might otherwise be made for these services.
(b) Conditions. A teaching hospital may elect to receive these payments only if -
(1) The hospital notifies its intermediary in writing of the election and meets the conditions of either paragraph (b)(2) or paragraph (b)(3) of this section;
(2) All physicians who furnish services to Medicare beneficiaries in the hospital agree not to bill charges for these services; or
(3) All physicians who furnish services to Medicare beneficiaries in the hospital are employees of the hospital and, as a condition of employment, are precluded from billing for these services.
(c) Effect of election. If a teaching hospital elects to receive reasonable cost payment for physician direct medical and surgical services furnished to beneficiaries -
(1) Those services and the supervision of interns and residents furnishing care to individual beneficiaries are covered as hospital services, and
(2) The intermediary pays the hospital for those services on a reasonable cost basis under the rules in § 415.162. (Payment for other physician compensation costs related to approved GME programs is made as described in § 413.78 of this chapter.)
(d) Election declined. If the teaching hospital does not make this election, payment is made -
(1) For physician services furnished to beneficiaries on a fee schedule basis as described in part 414 subject to the rules in this subpart, and
[60 FR 63178, Dec. 8, 1995, as amended at 70 FR 47490, Aug. 12, 2005]